Family offices, which serve as the personal investment entities for affluent families, are experiencing a renewed sense of optimism as they re-enter the investment arena. Recent findings from the 2024 Global Family Office Survey conducted by Citi Private Bank reveal that a staggering 97% of family offices anticipate positive returns this year, with nearly half expecting double-digit gains. This upbeat outlook marks a significant shift from the more cautious approach that characterized the previous two years when economic uncertainty and rising interest rates prompted many to hoard cash. Hannes Hofmann, the head of the family office group at Citi Private Bank, highlighted that this increased confidence reflects a growing appetite for risk, suggesting that these investors are ready to capitalize on market opportunities once more.
The survey results indicate that family offices are transitioning away from cash hoarding and are keen to diversify their portfolios with more aggressive investments. A staggering 47% of those surveyed are planning to boost allocations to direct private equity within the next year—the highest interest in any investment category. This resurgence in interest is accompanied by a notable trend toward private equity funds as well, with 41% of family offices intending to increase their holdings in this area.
This shift demonstrates a strategic pivot aimed at leveraging potential market growth, particularly in sectors that have shown resilience despite economic fluctuations. With only 11% of family offices considering a reduction in private equity holdings, it’s clear that the appeal for these investments has regained traction.
As interest rates begin to decline, family offices are also looking to rebalance their equity investments. More than 39% are contemplating increasing their exposure to developed-market equities, particularly in the U.S., which adds a new dimension to their investment strategies. Notably, public equities have emerged as the largest segment of family office investments, accounting for approximately 28% of typical portfolios—up from 22% the previous year. This trend underscores an evolving approach that embraces market engagement over cash preservation, signaling a shift toward higher-risk, higher-reward avenues.
Hofmann explains that family offices are redistributing cash into public equities, private equity, direct investments, and fixed income, thereby illustrating a broader trend toward what he describes as “risk-on investing.” This approach reflects not only a growing confidence in the market but also an active search for opportunities across various asset types.
Interestingly, fixed income has also emerged as a key focus area for family offices, as declining interest rates provide attractive entry points. Approximately 50% of family offices increased their fixed-income exposure last year—the highest proportion across all investment categories—and a third plan to further enhance this allocation this year. While the S&P 500 has surged nearly 20% year-to-date, the anticipated returns for 2024 remain a crucial consideration for these investors. With about 43% of family offices optimistic about achieving returns exceeding 10%, the outlook reflects an eagerness to engage actively with the equity markets while ensuring balanced risk.
However, this optimism is tempered by caution. Many family offices express concerns over the economy, particularly regarding interest rate trends and geopolitical tensions, such as the relationship between the U.S. and China. Market overvaluation concerns also rank high among their worries, indicating that while they are eager to invest, they remain acutely aware of the risks at play.
What distinguishes family offices from conventional investors is their deep-seated inclination towards alternative investments. According to the survey, private equity, venture capital, real estate, and hedge funds now form approximately 40% of family office portfolios. This allocation underscores the sophistication and long-term vision characteristic of family offices. Notably, technology-driven sectors, particularly artificial intelligence (AI), have emerged as a predominant theme in alternative investments.
Citi’s findings show that over half of family offices have some level of exposure to AI through various avenues, including public equities and direct investments. Notably, 26% are contemplating further involvement in AI ventures, highlighting an eager engagement with innovative technologies that promise future growth. Such allocations contrast sharply with their approach to digital assets, where a mere 17% are invested, illustrating a clear preference for tangible and scalable innovations over speculative assets like cryptocurrencies.
Family offices are shedding their cautious skin, moving confidently into a growth-oriented investment landscape as they adapt to changing economic conditions. With a strong appetite for diverse asset classes, particularly in private equity and AI, these financial entities are redefining their strategies in hopes of capitalizing on emerging markets and innovative technologies. As they navigate this evolving financial terrain, it will be fascinating to watch how family offices balance their newfound risk appetite with the inherent uncertainties that still loom over global markets. Ultimately, their experience and adaptability may well position them at the forefront of investment innovation in the years to come.
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